Accounting in the Knowledge Era

The shift to a knowledge-based economy has created significant challenges for accounting and corporate reporting. This presentation gives an overview of the challenges and opportunities facing accountants and businesspeople today.

11.
Knowledge reporting today
• Intangibles booked on balance sheet only
when acquired through a transaction
• Valuation based on discounted cash flows
• Internally-created intangibles not reported
• Almost all spending on intangibles flows
through the income statement (but not
broken out) –even though this spending
represents an investment
ICA-11

19.
i-capex =
intellectual capital expenditure
• Every company continuously invests in
intangibles (IT/processes, training, branding,
innovation)
• Cost is actually the one universal and tangible
metric available for intangibles
• These costs should recorded in an IC inventory
• Emerging accounting research about cost
http://www.melbourneinstitute.com/wp/wp2005n
15.pdf
ICA-19

20.
Assessment
• Judges the strength and suitability of intellectual
capital
• Good questions are around current capacity,
future capacity and risk
• Focus should be assets versus strategy (e.g. do
we have the right competencies to fulfill our
strategy)
• Scale can be 1-5, red/yellow/green, etc.
• Good sources: management team, internal and
external stakeholders
This is a new kind of balance sheet
ICA-20

21.
Performance
• Focus here is on linking financial metrics with
leading indicators
• Common approaches:
– Balanced Scorecard
– Dashboards
– Performance management systems
• Ex: if an organization is working toward a goal of
lowering returns by improving a customer
service process, how will can progress be
tracked?
This is a new kind of income statement
ICA-21